A majority of small businesses saw profitability exceed or equal pre-pandemic levels last year, a survey commissioned by the Chamber of SMEs shows.

The 2022 Business Performance Survey, conducted by Misco, shows that 39% of respondents said they had better profits last year than they did in 2019. 15% said their profits were more or less equivalent to 2019 and 17% saw profits close to pre-pandemic levels. 

However, some 18% reported their profits were still below 2019 levels and 11% said they were still far off from reaching the profits they registered in 2019. 

The survey was carried out last month and 237 business owners participated. 

When asked what led to an increase in their sales last year, 28% of respondents said it was the end of COVID-19 restrictions, with 18% saying there was more stability when compared to the previous year. 16% said that consumer confidence had increased and the feel-good factor had a positive impact on their sales. 

23% said sales dropped owing to lower customer spending power, followed by 13% who blamed inflation and 10% who ascribed decreases to their business having to increase prices. 

Comparing year-to-the-day profitability, 39% of businesses said they had a more profitable 2022 than 2021, 36% said their profits remained the same and 25% said they made less in profits last year than the year prior. 

When asked what was primarily contributing to businesses having to raise their prices, 26% said they had been pressed to do so because of an increase in the cost of imports, followed by 20% who blamed inflation costs and 18% who said it was due to wage costs. 

Business owners were also asked about their overall business sales for the start of the year, with 35% saying they are satisfied. 32% said they were neutral and 15% were dissatisfied. On the opposite ends of the spectrum, 10% said they were very dissatisfied and 8% said they were very satisfied. 

Some 43% of business owners said that they expect 2023 to be roughly the same, while 39% predicted that the new year will be better for them and 18% said that they expect it to be worse.  

Challenges of inflation, labour and skills shortages

A general increase in costs (14%)  was named as the most pressing challenge businesses expect to face in 2023, followed by an increase in wage costs (12%) and a labour shortage (9%).

Misco Director Lawrence Zammit said that while overall, business seems to be doing well, the data in the small numbers should not be ignored, he said, such as 5% of respondents who said that they had to reduce some of their business activity due to a lack of human resources. 

“This is not a good sign and must be addressed, if we are not careful it will lead to a negative impact on business,” he said. 

Chamber CEO Abigail Agius Mamo added that in tandem with a gap in the labour force, employers also reported a skills shortage and they often struggled to find workers with the appropriate skills to do the job. 

“The feedback we’re hearing now is that, okay, we can find people, but the service is suffering and they still need someone to look over them to make sure the work is done right, so this is where we’re seeing a gap,” Agius Mamo said. 

One size fits all in banking services

Chamber President Paul Abela also highlighted how some small businesses were struggling to keep up with costs related to banking services as compliance regulations had become more stringent. 

“The problem with these measures is they’ve taken a one-size fits all approach,” Abela said, 

“How can a business that brings in €100,000 a year compare to a big company bringing in tens or hundreds of millions?” 

“I think the government has to take and look and see what is happening at different levels because smaller businesses are finding it harder to comply. Just getting someone to do your vat return costs €500 or €600 a month and these are costs that small businesses cannot sustain.”

Survey composition

The majority of the survey respondents (26%) are involved in retail, import, distribution and wholesale, followed by 11% in professional services, 13% in tourism services, 12% in food and beverage, 8% in entertainment marketing and events, 7% in construction, 7% in household and office products, 6% in wellness and personal care, 5% in education and 5% in other miscellaneous services. 

Some 45% of those surveyed said that their business employs between one to nine people, followed by a quarter who had ten to 49 employees and 14% whose business employs over 50 people. Just 16% said that they run their business as a one-man operation.